KUALA LUMPUR (May 4): Shares of CIMB Group Holdings Bhd (CIMB) fell 11 sen or 1.57% in morning trade, notwithstanding the fact that analysts expect the group to turn in a stable performance for the first quarter to end March 31, 2018 and to meet its FY18 key performance indicators.
CIMB ended the morning session as one of the top 10 losers, finishing at RM6.89, with 6.53 million shares traded.
Following a pre-results meeting with the group, Hong Leong Investment Bank Research (HLIB Research) said it is maintaining its Buy call on the stock with an unchanged 12 month price target of RM7.90, pending release of CIMB’s first quarter results on May 30.
“We are optimistic that CIMB is poised to post another round of improved performance in FY18, benefitting from the tail end of its T18 strategy that ensures further earnings recovery and ROE expansion,” HLIB said in a client note.
It said CIMB’s management is optimistic about meeting its FY18 KPIs target, mainly supported by higher loan growth, absence of large impairment and a further decline in operating expenses.
According to HLIB, CIMB said these initiatives would likely result in FY18 ROE of 10.5%-11%.
Its analyst said CIMB expects to achieve 6% loan growth in FY18, mainly driven by the retail segment in Malaysia. However, it foresees continued weakness in overseas operations, particularly in Indonesia and Thailand.
CIMB is also expected to continue to push its digital banking segment across all key markets to improve its business process flow efficiency, which the aim of lowering its cost-to-income ratio to 45% over the next two to three years, from 51.8% in FY17.
The analyst also said major merger and acquisition activities for the group in FY17 will be concluded this year, which would result in one-off gains and lift the bank’s capital in FY18.
These include RM150 million in 1Q18, from a 50% stake disposal of CIMB Securities International to China Galaxy Securities, RM313 million in disposal gains from a 20% stake sale in CIMB Principal to Principal Financial Group in 2Q18, and RM637 million in marked to market revaluation gains on its existing 40% stake in CIMB Principal.